THE ECONOMIC TIMES MUMBAI MONDAY 25 OCTOBER 2010 * VIEWPOINT 17

Asset-sharing model to
LET TER F ROM LONDON
SU DESH NA SEN

service rural consumer
Coopetition will allow industry to overcome small throughput in
rural outlets and capture a market that mirrors urban aspirations
Even more interesting story is that in a recent,
large-scale survey carried out in rural India, the sin-
gle-biggest concern for people was children’s educa-
tion, followed by healthcare and housing. Food, em-
ployment, etc, came much lower. Not only are we
seeing a rapid rise in education levels, but this trend
will accelerate. And as we all know that education is
probably the greatest leveller and connector.
All of these have just brought rural India closer to
urban India. It would be inaccurate to say that there
are no differences between urban and rural markets.
But the divide is not so sharp any more: lines have
Hemant Bakshi blurred and the differences will come down further,
faster than we think.
This has significant implications for the sales and
Wall Street to
the Great Wall
The challenge for suppliers is the small size of each
village with low throughput per outlet. Combined
with higher cost of distribution since each village is
some distance away from the location of distributors,
makes high-quality distribution unviable. In most
cases, it severely constrains the ability of most compa-
niestoreachstoresinruralareas,andevenwhenthey
do, it is with compromised servicing models. And yet,
as the environment changes, there are new opportu-
nities that are becoming possible.
New technologies are enabling lower-cost distri-
bution models. It’s now possible to geo-tag every vil-
lage and use logistics models to develop most opti-
mum routes. This can be done sitting in Mumbai with
better information than is available to a distributor 15 I F YOU are the kind of person who likes playing military strategy games,
this might be a good time to make a world map, put nice little red, blue and
yellow pins for political, social, economic and financial types of events,

W
E WERE going to a rural market
deep inside Orissa, 150 km from
Bhubaneswar. Rural trips are
preceded by elaborate rituals:
stocking bottled water, topping
up car’s fuel tank, packing lunch, and setting out
As rural India early in the morning for a long and hard day.
We drove down a fantastic four-lane highway,
bypassing many small towns, and in 2.5 hours, reac-
starts to hed a small town. From here, we turned off the
highway to go to Barasaat, our destination, a tiny vil-
become more lage with only 400-odd households. It was 15 km
from the highway, connected by a narrow but met-
and more like alled road. We reached our destination in another 30
minutes, clearly a couple of hours ahead of plan.
You cannot escape the poverty in this small vil-
urban India, lage, but it is not as debilitating as one would have
imagined. And there are signs of progress every-
providing where, especially in the shops we visited. Expensive
skin creams in small packs, floral perfumes with
fancy names, baby products and even hair colours.
distribution of The retailer is surprised when I ask him if he sells any
of these in the village. Why would I stock them it
products and they don’t sell, he says. Not a smart question I guess.
Mobile phones are all-pervasive: our salesman
uses it to not only check on stock availability with the
services across distributor and book orders, but also to warn his wife
that he is unlikely to return home on time. His caller
the hinterland tune is Waka waka. I am surprised at his comfort
with mobile technology; I just about restrain myself
from asking him to fix my phone that keeps switch-
is a big ing networks while we are there.
We need to expand our network in rural areas
opportunity. and need more people from these parts to work for
us. So how much should we pay them, I ask… and
However, more the response immediately is: at least .̀ 120 per day.
The reason for such a specific response: that’s the
amount you get through NREGA, therefore, any-
and more thing less than that just does not cut ice. There goes
another myth of lowly-paid people in rural areas.
rural retailers A few days later, I am sitting with my board col-
leagues and discussing future plans. And the conver-
sation turns to the great rural opportunity waiting
want urban for us to tap. Where does urban area end and rural
area begin? Travelling from Bhubaneswar to Bara-
model of saat, you would find it difficult to say. In fact, the lines
between urban and rural areas, from a marketing
and distribution point of view, are blurring rapidly.
servicing, not There are many reasons for this, but connectivity
is the key. Roads built in the last decade have had a
compromised significant impact in blurring these lines. Cellphones
have also connected rural to urban parts. Media on
mobile is changing pop culture: my nine-year-old
servicing, just son in Mumbai and the 21-year-old salesman in ru-
ral Orissa have the same ringtone. Probably both of
because they them saw Shakira do the Waka in a popular TV ad-
vertisement and downloaded it on their phones.
are in rural A silent revolution has taken place. Rural literacy
has gone up nationally, but as in many other things,
averages hide more than they reveal. If you leave
areas out four states where the progress has been slow, in
rest of the country, literacy in rural areas has in-
creased dramatically in the last five years. Even more
interestingly, female literacy has outpaced overall
literacy in these states. This is probably the single-
largest drive towards educating people ever in the
history of humankind.
marketing profession. And my answer to the eternal
question of how to market in rural areas is slightly
provocative: we don’t need to develop rural market-
ing models. We need to find a way of providing urban
brands, products and servicing models to rural India.
Consumers in rural India have the same needs and
aspirations as their urban counterparts. The big chal-
lenge and opportunity is to provide access to these
products and services in rural areas.
Access can take many forms. Sachets are a great
example of providing access. They deliver the same
product and the same benefit without compromise
and yet are accessible to every Indian. Service provid-
ed by telecom operators is the same, whether used by
thepoorestortherichest.Andincredibleaccesstothis
service is via prepaid cards for as low as .̀ 4.
As rural India starts to become more and more like
urban India, providing distribution of products and
services across the hinterland is a big opportunity.
However, the distribution challenge in the country is
immense: more than six million retail outlets spread
across 6,38,000 villages. More than 85% of these vil-
lages have a population of less than 2,000.
The challenge seems insurmountable. Most orga-
nisations have leveraged traditional wholesale mod-
el to get their products across to these stores. Howev-
er, more and more rural retailers want a full
assortment of products, not a limited range: regular
frequency of service and convenience of door deliv-
ery, credit to fund their cash-flow needs, all the pro-
motions, fair prices, merchandising and activation
support for their shoppers. In many ways, they want
urban model of servicing, not compromised servic-
ing, just because they are in rural areas.
kmawayfromthevillage.However,thechallengefor
the sales professionals is to find the equivalent of the
sachet that could transform this landscape.
There are a number of organisations, consumer
goods, telecom, financial services, etc, all trying to re-
ach the same customer, but the very small through-
put per outlet will remain a barrier, restricting the via-
Illustrations by SALAM
bility of high-quality servicing in rural areas. Indivi-
dually, it will take us a long time to penetrate the
deepest, smallest rural markets at prohibitive costs.
However, if some organisations join hands, the
throughput in every individual outlet would be ade-
quate to get to a viable size. The average size of a store
in rural India is a third the size of an urban store. An al-
liance across a few category leaders would ensure
throughput from every rural store equals urban
ones. This could be the gateway to rural India.
So what is the challenge in constructing such a
partnership? The biggest challenge will be mindset,
the dominant logic that we must all own our front-
end sales system. In many industries, assets that were
proprietary are now being shared. ATMs became
ubiquitouswhenbanksstartedsharingthisasset.The
mobile infrastructure reached scale when the mobile
towers were shared. Today, this seems a no-brainer
but it wasn’t like this a few years ago.
Access to rural India through partnerships is a real
possibility and a huge opportunity. The need of the
hour is for the industry to partner, share assets, over-
come traditional mindsets and take the high road to
growth for the consumers and industry.
(The author is executive director for sales and
customer development at Hindustan Unilever)
and see the fascinating new patterns that are emerging.
So Barack Obama is on his way to India, which visit is likely to be, when not
overwhelmed by his charisma and Michelle Obama’s glamour, fraught with
tension over that crucial word ‘outsourcing’. That will have to be put in the
balance against whatever political concessions Mr Obama chooses to make on
that other key word, Pakistan. The way the pins are looking to me, the political
looks set to overshadow the economic, which will be unfortunate.
Because, currency wars or not, it’s still all about the economy, stupid. Even
if the BSE is roaring, Coal India was a super-success IPO, and nobody in India
wants to be bothered about silly things like global fiscal imbalances. A word of
warning though. Diwali, for varieties of reasons such as the timing of the bo-
nuses that traders and bankers get, is always a bullish time. Around Christmas
is when they start selling, to ensure they get those bonuses. I’d be surprised if
Coal India’s share price doesn’t do a yo-yo act over the next few months.
Anyway, to get back to boring things like global fiscal policies, that’s the real
reason why this IPO has been such a super success — not the India or Coal In-
dia growth story. At the G20 finmins’ meeting in Seoul, these shifting balances
of power looked less like a pattern and more like a crazy kaleidoscope. Every-
one ‘vowed’, ‘promised’ and ‘agreed’ not to use currency as weapon of trade
destruction. That means all of nothing, since they all vowed various things in
the past, but everyone is happily since following their own different policies.
Oh, and finally, Mr Mukerjee is happy, because emerging nations have now
more power in the IMF, and two more seats on the board. No surprises, those
seats come at the cost of Europe, which as a region, is dwindling, both in politi-
cal and economic clout. All very well, but the critical question is: what is the
IMF expected to do? Its global role has become extremely vague, and nobody
is sure it can do anything much more than moral suasion.
In the face of the crisis in 2008, the G20, or group of 20 nations, became the
forum where decisions were taken. Now, that grouping is drifting further and
further apart. The US wants to print more money and spend its way out of un-
employment, and generate more demand. It wants China to save less, and
stop holding massive surpluses.
China doesn’t, as usual, care much of a fig for what the rest of the world
wants them to do internally, and wants the Americans to stop flooding the
world with dollars. Europe, led by Germany, and mostly in France, and UK are
moving in the completely-opposite economic direction. They’re slashing
their budgets and jobs, and tightening their belts. Everyone, in Europe and the
emerging world, is blaming both US and China for the current mess. France,
which will lead the group from next month, has its own views about how the
world should be run.
Oh, and global banks are back in the business of pulling the strings that
make countries and economies dance to their tune. Nicolas Sarkozy recently
said it isn’t the global markets, but global speculators (read bankers) who
make and break international policies. Nobody knows whose approach will
work, and what will fail completely. Economists and analysts continue to ar-
gue into forever, just like different governments.
In UK and continental Europe, governments are taking a massive risk of
widespread social and economic depression, to cut their sovereign debts. In
US, nothing seems to perk up employment, Mr Obama’s political base is erod-
ing, so they’re getting shriller about everyone and everything else globally. So
what kind of patterns are emerging on the world map? Nobody knows for
sure, except that China, fairly quickly, will have the size and wealth of the en-
tire developed world today. The US could spend, borrow, or change its mind
and start saving, but it should eventually be out of the woods, though on the
way, Mr Obama may lose his job, the country could go all jingoistic, both polit-
ically and economically, and it might never regain its superpower status.
Europe, in the days of its fading glory, could end up as a grouping of rather
poor nations struggling to maintain their welfare states, or if things work out,
slowly grow its way back to being a middling world power. It’s unlikely
though, that either UK or Europe is going to be in any shape to back any more
American militaristic adventures around the world.
If I’m not mistaken, the kind of people who do scenario planning are work-
ing on possible futures where we all live in a Global Republic of China. I don’t
think the Chinese want to be bothered, as yet. Still, it might not be that bad,
given that we’re currently living in a world ruled by Wall Street. Again.
sudeshna.sen@timesgroup.com

P E RS P ECTIVES

Powering ahead the smarter way

show that it is possible and has become popular in the
US, Germany, Spain and Italy among other nations.
What makes smart grid special is that it is environ-
ment-friendly. According to a research sponsored by
the US government, improving the efficiency of the na-
tional electricity grid by 5% would be equivalent to
eliminating carbon emissions and fuel use of 53 million
Prakash cars. This digital distribution not only negates waste but
Nayak also opens up the market for alternative energy pro-
ducers of all sizes, by decentralising energy production.
Powering the world: During last year’s economic crisis,
the country’s transmission and distribution (T&D) loss-
es are among the highest, averaging at 50% after taking
power theft into consideration. Installing smart grid is
thebestwaytoreininthelossesandrampupgeneration
to meet energy needs of the growing economy.
The government initiated the Accelerated Power
Development & Reform Programme (APDRP) in 2001,
aimed at strengthening sub-transmission and distribu-
tion networks, thus reducing aggregate technical and
commercial (AT&C) losses. In 2008, the Restructured
APDRP (R-APDRP) was released with revised terms,

E FFICIENCY and sustainability are the twin

mantras to emerge from the economic slow-
down. In this recovery, smart infrastructure is
expected to play an important role. In India, the gov-
ernment has made it clear that infrastructure will be an
area of sharp focus ahead. And within infrastructure, it
will aggressively pursue its goal of Mission 2012: Pow-
er To All — a blueprint that encompasses generation,
transmission, distribution and conservation — to en-
sure sufficient and quality power at an optimum cost.
Interestingly, what seems like an ambitious goal is
within reach with one of the most potent concepts of
all times: the smart grid. This state-of-the-art technolo-
gy integrates a power grid system into a single, interac-
tive real-time network to ensure improved perform-
ance and reliability while eliminating waste for a lower
environmental impact. In fact, smart grids optimise
not just generation and distribution but also consump-
tion. And with their ability to consolidate power from
conventional and clean energy sources, they reduce
CO2 emissions as far as is technically feasible.
How is this possible?:The traditional power grid is based
on centralised generation plants that supply consum-
ers via long-established, unidirectional transmission
and distribution systems. In contrast, a smart grid is an
advanced version that not only delivers reliable suppli-
es on demand but can also receive power of all qualities
from all sources — both centralised and distributed.
For instance, visualise a home where residents keep
track of their energy spending. A smart meter helps
run the washing machine during non-peak hours to
make use of lower tariffs. What’s more, the house has
solar panels and a mini wind turbine installed on the
roof. So, instead of using energy from the grid, the resi-
dents can bank on their own energy production, and
even sell the extra energy to the grid. Though this con-
cept sounds futuristic, experiments across the world
USPresidentBarackObamapassedan$11-billionstim-
ulus package for smart grid technology and for expand-
ing transmission to renewable-rich areas. With 30%
rise in funding, the project will include smart meters.
In Germany, the Minimum Emission Region project
is being deployed on a pilot basis in the southern region
A smart grid integrates a
power grid system into a
single, interactive real-time
network to ensure improved
performance, eliminating
waste for a lower
environmental impact
of Karlsruhe-Stuttgart, one of the country’s most den-
sely-populated areas and one of Europe’s biggest man-
ufacturing hubs. The project aims to minimise CO2
emissionbyintegratingcleanenergysourcessuchasso-
lar energy panels, wind turbines and fuel cells. The pro-
ject was recently awarded E-Energy: ICT-Based Energy
System Of The Futureby the German federal ministry of
economy and technology. The project will involve
1,000 homes, and will allow consumers to monitor
their energy consumption and CO2 footprint, alter
consumption pattern according to price and availabili-
ty, and sell self-generated power back to the power grid.
India: On its way to smarter grids: According to a KPMG
study, even in the current low-growth scenario, India
would need to raise its installed capacity to at least 183
gw by 2012 from the existing 132 gw. The challenge is (TheauthorisheadofpowersystemsbusinessatABBIndia)
with focus on actual and demonstrable performance in
terms of sustained loss reduction. Till date, 27 states
have either notified or constituted their regulatory
commissions with 100% feeder metering in 20 states.
Karnataka taking the lead: In a first of its kind project in
the world, the Karnataka Power Transmission Corp
(KPTCL) has decided to strengthen its power networks
and the constituent distribution utilities. With a con-
sumer base of almost 16 million and plans to add about
10,000 mw power in the next few years, KPTCL’s T&D is
multiplying every year. The integrated Scada solution
will include monitoring 867 T&D stations with one mil-
lion input and output points across Karnataka from a
single control room in real time in Bangalore.
TheprojectwillhelpKPTCLmanagedistributedgen-
eration from independent power producers, non-con-
ventional energy producers and mini hydel plants in
the KPTCL grid. A significant step in making the grid
smart, this project will also help in reducing line losses,
voltage irregularities and energy billing.
Towards a sustainable future: The world over, the re-
sounding cry today is for renewable energy sources that
are also cost-efficient. Therefore, there is no better time
to get smart and turn green than now. In this context, a
smart grid is the right way forward.
Being a new concept, research and implementation
is happening at almost the same breath. In this context,
countries like India and China, which need to increase
their power supply exponentially each year, can set ex-
amples using smart grid, especially for newer networks.
Howsoeverwetry,therearenoshortcutstoreachthe
dual targets of meeting energy needs while staying
green. Plugging the leaks and maximising efficiencies
will be the way forward for a long time. In all probability,
turning smart has never been more advantageous.